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Donald Trump's newly found enthusiasm for crypto, particularly his bold plan to introduce a “Bitcoin Reserve” similar to gold or oil, has sparked both excitement and controversy. His ambition to bring cryptocurrency into the mainstream has invigorated parts of the struggling crypto community but has also left policymakers and economists divided.
Trump’s July 27 speech at the Nashville Bitcoin Conference turned heads when he vowed to establish the United States as the “crypto capital” or a "bitcoin superpower." He announced a plan to create a sovereign “Bitcoin Reserve” that would allow the U.S. to stockpile the digital currency, similar to how countries hold reserves of gold or oil. Trump framed the move as a game-changer, suggesting that Bitcoin could be used to address the nation’s US$35 trillion debt.
In his address, Trump also predicted that Bitcoin's market capitalization would eventually surpass that of gold, which stands at $16 trillion. If that happens, according to Trump, the U.S. could leverage its Bitcoin reserves to become a global crypto leader, asserting dominance in the financial sphere. This idea has been praised by crypto utopians as a potential masterstroke but has met sharp criticism from financial experts and traditional economists who fear that such a move could undermine the U.S. dollar's dominance.
Trump’s sudden embrace of cryptocurrency has drawn mixed reactions. Crypto enthusiasts view his proposal as a potential breakthrough that could integrate Bitcoin into the U.S. financial system. They believe this move would boost Bitcoin's legitimacy, reduce volatility, and solidify the U.S. as a leader in digital currency innovation. In this light, Trump's proposal has been hailed by some as a visionary approach to future-proofing America’s economy in the rapidly evolving world of digital assets.
However, crypto cynics, including economists and policymakers, have been contemptuously worried. They claim the Trump plan is more political than practical. According to Krishnendu Chatterjee, co-founder and CEO of A2Z Crypto, “Trump’s idea stems from the fact that Bitcoin might become a global reserve. Unfortunately, I don’t think it would be acceptable for major central banks, as they could lose control over monetary policies.”
Critics view Trump's crypto pivot as a political play to garner much-needed funding and support from the crypto community for his presidential bid. Central banks and chief financial regulators would, of course, oppose the move to add Bitcoin to the national reserves because of the potential to weaken their grip on control of the monetary system. Volatile and decentralized, Bitcoin is an unpredictable asset to back the nation's financial stability.
Trump is not the only American political figure mobilizing behind cryptocurrency. Senator Cynthia Lummis filed legislation that would obligate the U.S. government to buy at least 5% of all Bitcoin-estimated at around one million Bitcoins. Meanwhile, independent presidential candidate Robert F. Kennedy Jr. advocates for the U.S. government to acquire four million Bitcoins. These political moves demonstrate a growing acknowledgment of cryptocurrency's potential to reshape the financial system.
The U.S. House of Representatives has also passed a bill that offers regulatory clarity on cryptocurrency. This legislative move reflects a broader intention to treat digital assets like other asset classes, providing a framework for their regulation and integration into the national economy.
The U.S. currently holds approximately US$11.1 billion worth of Bitcoin, around 205,515 BTC, primarily acquired through FBI black market seizures, according to crypto intelligence firm Arkham Intelligence. Other major holders include China, with 194,775 confiscated Bitcoins, and countries like the UK and Germany, holding 61,000 and 50,000 Bitcoins, respectively.
Comparatively smaller countries like El Salvador and the Central African Republic have already accorded Bitcoin the status of legal tender. It has acquired as many as 2,546 BTCs and is buying one Bitcoin every day. Ukraine has also received wide-ranging Bitcoin donations in its war with Russia. Countries like Bhutan are exploring the mining of Bitcoin to exploit their natural resources for digital asset production.
Despite the growing global interest in Bitcoin, financial experts are skeptical about whether it could ever function as a reserve asset akin to gold or oil. Bitcoin's limited supply, highly volatile nature, and decentralized structure could make it more prone to speculation and less stable than traditional reserve assets. Additionally, making Bitcoin a reserve would concentrate most of the power in the hands of big players, which goes against the spirit of choice for decentralization of the currency.
Central banks worldwide remain skeptical of Bitcoin and cryptocurrency in general. The U.S. Federal Reserve itself has not decided yet whether to impose a central bank digital currency, although ongoing research concerning their risks and benefits is still in the works. Other countries like India have already started experimenting with the CBDC version of their currency, such as the e-rupee, but have also warned investors against the instability and lack of regulation in the crypto market.
Trump's idea of a Bitcoin Reserve also raises concerns about how such a system would be managed. Theoretically speaking, experts say that the Federal Reserve could work with Bitcoin reserves similar to how it does with gold. Of course, a volatile and decentralized asset such as Bitcoin is another matter to regulate, and there are some evident practical questions about how such a system would be implemented.
Moreover, having huge stocks of Bitcoin in strategic reserves might introduce price volatility into the market for digital currencies. In an environment where so much power is concentrated in the hands of the U.S. government, Bitcoin will be more vulnerable to market manipulations and less attractive as a decentralized asset.
But while Donald Trump's suddenly avowed passion for cryptocurrency certainly injected new excitement into the Bitcoin community, it has also raised serious questions regarding its feasibility and risk. While such a vision as Trump's plan to establish a Bitcoin Reserve might sound great to some, there are serious obstacles on the economic and regulatory levels.
For now, Trump’s crypto pivot is a highly speculative gamble, which could make the US either a Bitcoin superpower or vulnerable to a load of new financial risks. Whether his plan is an earnest call for digital assets' integration into the national economy or is just a political move will get much clearer as the presidential election approaches. In the meantime, the future of Bitcoin and its place, if it has any, in the global economy remains up in the air.
